In a world where digitalization prevails, neobanks face a major security and compliance challenge. In France, the ACPR (Prudential Control and Resolution Authority) plays an important role in watching and controlling the new financial players, ensuring that legal and regulatory requirements for consumer protection are respected. However, some believe that neobanks are less secure than traditional banks because of recent cases of fraud and data hacking. Think of Revolut, for instance: numerous users have been hacked, and only a few were refunded.
Being dependent on technology is another major challenge for neobanks, who entirely rely on digital platforms. “All businesses rely on information. Traditional banks use legacy systems that don’t adapt easily to change. API could be a solution to renew the system, but in the end, technology is more of an asset for neobanks than it is for traditional banks”, explains our expert.
The impact of neobanks on competition in the banking sector is concerning. Even if most clients see them as additional services only, neobanks intend to become their clients’ main bank. To achieve this goal, they will have to broaden their offers and include key elements such as check deposit and consumer credit and mortgage. Such development requires considerable investment.
“In a nutshell, neobanks play a key role in driving the evolution of the banking sector, fostering competitiveness and innovation, particularly in terms of customer experience.”
They provide considerable advantages for clients, retailers and traditional banks, such as ease of use, lower costs and personalized services. However, there are still many challenges to tackle, including security, compliance and profitability.
In order to succeed, neobanks will have to focus on:
- securing transactions,
- data protection,
- and exploring new ways to make money.
Their ability to adapt to an ever-changing environment and to new technologies like AI and blockchain will determine their success and impact on the overall banking industry.
Could neobanks reshape the way we handle our finances and transform our relation to money? Only time will tell.